Within our community, there can be a lot a shame in asking for help and managing our money. We expect to do it all on the strengths of our own merits. Unfortunately, a lot of us are not financial experts and even though we’re doing the best we can, we still sometimes mismanage money and pass on poor habits to our children. In many cases, instead of building generational wealth we create a cycle of poverty. That ends today.
Welcome to “Financially LIT” presented by the Michigan Chronicle and First Independence Bank. You are officially enrolled in the hottest financial literacy course in the city. Every month, we’ll give you the tips you need to live your best financial life.
“Our goal is to empower the community to take control of their finances and generate wealth that can sustain our families and our community well into the future,” said Kenneth Kelly, CEO of First Independence Bank, “As the only Black-owned bank in Michigan, we are attuned and committed to the financial prosperity of Detroiters and think this series is a much-needed resource for so many.”
To kick the series off, let’s talk about budgets and the lies we tell ourselves about why we can’t.
#1 Budgeting is hard.
A budget can overwhelm you if you make unrealistic goals. Before you start cutting things out, figure out where your money is going every month. Break down your monthly expenses by category: house, auto, food, utilities, attire, and entertainment. The breakdown should be:
- 50% – Essential expenses (house, groceries, utilities, car expenses.)
- 20% – Financial goals (emergency, retirement, mortgage down payments, etc.)
- 30% – Lifestyle and entertainment expenses (shopping, nights out, vacations, etc.)
If you’re a chronic credit card swiper like me, look at your bank statement and see how many times you purchase things that aren’t on your budget and how much that adds up to. You may be hemorrhaging money on spur-of-the-moment coffee runs and $1.99 in-app purchases. This leads us to Number Two—
#2 Treat Yourself
You work hard for your money, and nobody will tell you that you can’t have what you want, right? EXCEPT, your savings is nonexistent, your car could break down tomorrow, and you’d be totally lost if an emergency arose. Yes, it is important to indulge, but not to the detriment of your financial health and security. Start by setting aside $25 from every paycheck before you indulge and treat yourself to a secure financial future.
#3 I don’t make enough money to set anything aside.
It’s hard to think about saving money for the future if you are living paycheck to paycheck. However, this is why it is so important to review your finances and know where your money is going. If you are spending $10 a day on lunch, pack a lunch from home and put that $10 a day ($50 a week) into a savings account or set aside for emergencies. How many recurring subscriptions do you have? Do you need all of them? Netflix, Hulu, Amazon Prime, Spotify, gym memberships can all make a dent in your budget. Cutting Netflix alone can save you over $150 a year. Another thing to do is to look for a second stream of income. Your savings could be hanging up in your closet or collecting dust in your basement right now; sell those items on sites like PoshMark or Tradesy.
#4 Budget for what? I always have money left over.
That’s great! However, imagine how much more you could have saved if you actually took the time to budget. The extra money that you could save can directly to an emergency, retirement, or college fund. On the other hand, if you have money left over and your credit score is a 440, you are still in debt and the extra money can go towards boosting your credit score.
It’s the little things that can make a big impact. Set a regular schedule to review your finances and adjust your budget. Your budget is a living, breathing thing that you should engage with consistently. It’s not enough to create a budget and never look at it again. Still not sure where to get started? Visit https://www.firstindependence.com/ and check out the home budget analysis tool, retirement planner, or savings calculator to help create a budget that is manageable and will serve you well into the future.